Trademark Law Does Not Presume Profits Without Proof - Damages Cannot Be Awarded on Guesses and Assumptions: Delhi High Court

“He Who Claims Must Prove”: No Evidence, No Cross-Examination – Quantification of Trademark Damages Must Be Rooted in Law, Not Speculation. In a crucial ruling, a Division Bench of the Delhi High Court comprising Justice C. Hari Shankar and Justice Om Prakash Shukla partially allowed an appeal in B.C. Hasaram & Sons v. Smt. Nirmala Agarwal, setting aside a decree awarding ₹48.35 lakh as damages in a trademark infringement case, on the ground that no foundational evidence was led to justify the quantification.

Though the Court upheld territorial jurisdiction and the finding of infringement against the defendant, it remanded the case to the trial court for a fresh adjudication limited to the issue of damages/account of profits, giving both parties a chance to lead evidence.

The Division Bench held unequivocally:

"Speculative or hypothetical assertions cannot form the basis for a substantial damages award. The principle ‘he who claims must prove’ squarely applies to the facts of this case."

“Territorial Jurisdiction Requires Real Injury, Not Passive Access”: Banyan Tree Test Applied

On the question of territorial jurisdiction, the Court reaffirmed the jurisprudence established in Banyan Tree Holding (P) Ltd. v. A. Murali Krishna Reddy, holding that the combination of the ‘Sliding Scale’ and ‘Effects’ test is the correct legal yardstick to assess jurisdiction in internet-based trademark infringement cases.

The Court ruled that the test purchase of the defendant’s eye drops (“Amrit Nayan Jyoti”) by the plaintiff’s investigator through an interactive website, which led to actual delivery in Bhajanpura, North-East Delhi, clearly satisfied the requirement of injurious effect in the forum state. The District Court’s territorial jurisdiction was thus upheld, with the Division Bench noting:

"The defendant’s website is not merely interactive but allows customers in Delhi to place orders and receive deliveries… The learned District Court correctly relied on the website and invoice of delivery." [Para 35]

“No Evidence, No Cross-Examination – Damages Introduced Only in Written Submissions”

While maintaining the injunction against trademark infringement, the High Court took strong exception to how the damages of ₹48.35 lakh were awarded. The District Court had relied on:

• The Local Commissioner’s (LC) report of seized stock;
• A presumption that the seized stock represented one month’s quantity;
• An assumption that the defendant operated for two months;
• And a notional price of ₹45 per unit to arrive at damages.

However, the High Court held that none of these assumptions were supported by evidence, and most critically, no computation of damages was included in the plaintiff’s evidence or subjected to cross-examination. The figures were introduced only at the stage of final written submissions.

"There is no clear analysis or rational basis indicating how the damages were quantified. The assumption that the seized stock constituted one month’s supply… is wholly unsubstantiated." [Para 41]

"The absence of cogent reasoning and evidence linking the damages to proven injury diverges the award from the compensatory principle that governs damages." [Para 42]

The Court reminded that Rule 20 of the Delhi High Court IPR Division Rules, 2022, requires damages to be based on:

"Foundational facts/account statements in respect thereof along with any evidence, documentary and/or oral led by the parties to support such a claim."

“Speculation Is Not Justice”: Kabushiki Kaisha Toshiba Applied to Reinforce Evidentiary Standard

The Court placed reliance on its own recent ruling in Kabushiki Kaisha Toshiba v. Tosiba Appliances Co., (2024 SCC OnLine Del 5594), which had ruled that speculative claims must be rejected:

"The burden of proving damages rests unequivocally with the plaintiff... They must provide a reasonable estimate of the amount claimed... Speculative or hypothetical assertions cannot form the basis for a substantial damages award."

This principle was used to tear down the award granted by the District Judge, who had treated packaging and raw material at par with finished goods, and computed damages on MRP without showing actual loss or infringer’s profits.

The Court categorically observed that:

"Damages were erroneously calculated on the price of the original product of the defendant, rather than on the actual profits earned by them... there cannot be any room for hypothetical or arbitrary estimations." [Paras 41–42]

“Trademark Law Does Not Presume Profits Without Proof”: LC Reports Not a Substitute for Evidence

The respondent/plaintiff had argued that since the defendant had suppressed financial records, the LC’s seizure report should suffice as a reasonable basis for estimating damages.

However, the High Court rejected this line of reasoning, holding that while LC reports may assist in estimation, they cannot substitute the requirement of evidence, especially when speculative assumptions are layered one upon another. The Court distinguished its prior rulings in SanDisk LLC and Puma SE, pointing out that those cases involved actual proof of sales lost and ex parte affidavits of computation—neither of which was present here.

"The LC report alone cannot justify hypothesized duration or scale of business... quantum of damages awarded require a reasoned basis tied to evidence of actual loss." [Para 42]

“Compensatory or Punitive – Both Require a Legal Bedrock”

The Court reiterated that Section 135 of the Trade Marks Act, 1999, though silent on methodology, requires damages to be tethered to either actual loss or infringer’s gain, and that without evidentiary basis, both compensatory and punitive damages fail.

"The Court plays a dual role of safeguarding rights and balancing broader contextual factors... but it is the evidence which constitutes the bedrock for any award of compensatory or punitive damages." [Para 42]

Appeal Partly Allowed, Matter Remanded for Fresh Determination of Damages

In the final outcome, the Delhi High Court partially allowed the appeal, set aside the damages award, and remanded the case to the District Court for fresh adjudication solely on the issue of damages/account of profits. Both parties have been permitted to lead evidence afresh.

Further, the appellant is allowed to withdraw the deposited decretal amount.

"The present matter is remanded... after permitting both parties to lead evidence including production of any material as may be relevant for quantifying damages in accordance with law." [Para 43]

Date of Decision: 12 November 2025